'Groovy mood': ASX jumps on trade, Brexit optimism

Helped by renewed optimism towards the prospects for a US-China trade deal and breakthrough in Brexit negotiations, Australian shares rose strongly to end the week, propelled by strong gains in miners, banks and healthcare stocks.

The benchmark S&P/ASX 200 Index rose 59.7 points, or 0.9 per cent, to close at 6606.8, ending what was a wild week for investors on a positive note.

“Markets have moved into a pretty groovy mood, boosted by positive Brexit headlines and improved prospects of a US-China detente,” National Australia Bank senior strategist Rodrigo Catril told clients.

Trader Gregory Rowe works on the floor of the New York Stock Exchange, (AP Photo/Richard Drew)Credit:RICHARD DREW

Mirroring the performance of the broader index, all sectors aside from industrials finished higher for the session.

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Helped by strong gains in commodity markets, resources surged 1.4 per cent, closely followed by healthcare and materials with gains of 1.3 per cent. Telecommunications and energy also added 1.2 per cent apiece, the latter helped by a rally in crude oil prices on Thursday.

Financials also chipped in with a gain of 1.1 per cent, benefiting from a strong lift in global bond yields as risk appetite improved.

Gold miners were hit by falling bullion prices and improved investor mood with the All Ords gold index sliding 1.2 per cent.

By individual stock, gold miner Silver Lake Resources logged the largest gain on the benchmark index, soaring 12.5 per cent to $1.035 following a positive production update. Financial services platform provider Netwealth Group finished at the other end of the scoreboard, slumping 5.5 per cent to $8.69 following a broker downgrade from UBS.

The broad-based gains on Friday helped the S&P/ASX 200 Index lift 1.4 per cent for the week, logging its first increase in three. Healthcare and telecommunications led the gains, jumping more than 3 per cent. Information technology added 2.4 per cent while industrials rose 1.9 per cent.

The positive mood was helped by US President Donald Trump who said trade talks with the Chinese in Washington were going “very well”. Despite being heard many times before, it was enough to lift confidence that a partial trade deal may be reached between the two sides. Trump and Chinese Vice-Premier Liu He were expected to meet mid-afternoon in Washington on Friday.

Adding to the buoyant mood, signs of progress in Brexit negotiations were also welcomed by investors.

Following a meeting between UK Prime Minister Boris Johnson and his Irish counterpart Leo Varadkar on Thursday, the two leaders issued a joint statement acknowledging they “could see a pathway to a possible deal”, leading to speculation that another delay to the UK-EU divorce date or hard Brexit at the end of this month could be avoided.

“I think it is possible for us to come to an agreement, to have a treaty agreed to allow the UK to leave the EU in an orderly fashion and to have that done by the end of October,” Mr Varadkar told Irish media.

Like stocks, the improvement in risk appetite helped to boost the Australian dollar which sat at a two-week high of 67.78 US cents in late Asian trade on Friday. Australian bond yields also jumped with benchmark 10-year rates lifting to 1.018 per cent, well above Thursday’s low of 0.87 per cent.

Despite the sharp lift in investor sentiment on Friday, the NAB’s Catril warned the good vibes may not last.

“The prospect of US-China trade truce that results in the suspension of further planned tariffs increases is rightly a welcome news. But as it is often the case, the devil will be in the detail,” he said. “If the current groovy vibes are to become longer lasting, a meaningful de-escalation in tensions is required.”